5 key tips for emerging hedge funds to look out for

The global hedge fund market, despit maintaining overall levels of AUM, has seen difficult times recently. It is becoming more and more difficult for new funds to gain investment and expectations of genuine alpha are playing second fiddle to a new role for hedge funds as risk diversification becomes ever more important.

However, a recent Prequin report (published in Hedge Funds Review) stated that whilst times are still difficult, in Europe the number of people who either definitely will or are looking to invest in Emerging Funds has increased to over 60%, and globally, investment in Emerging Funds is seen as one way to capture the alpha hedge funds used to offer.

With this in mind, I thought it would be interesting to share some information I recently read on hedgco.net which referenced an interview with Jed Alpert, MD at PerTrac. This contained 5 tips on how an emerging manager can keep ahead of the game and keep interesting investors:

Focus on performance – make sure this is better than your peers

Understand that investors have different requirements, and learn how each investor is evaluating you indivually for their portfolio.

Understand what investors actually want from you

Be ready to explain to investors why you have lost money and grown at key times; be able to explain your performance based on what markets are doing

Make sure you fill all the risk management checklists. Investors remain cautious of scandals and investing in emerging funds only increases this level of concern.

The final part of the interview was a single thing to avoid – sytle drift. Investors put together portfolios based on what they are told, and want certain risks and exposures contained within these investments. Hedge funds have to deliver what they promise in the current environment, and this can be a genuine concern of investors.

I hope this made an interesting read. These issues, and many like them will be discussed at the Hedge Funds World Asia event which will run in early September in Hong Kong. And if you’ve got anything else to add, please leave it below!

I cover investments across a broad spectrum of assets, although I specialise in both hedge funds and agriculture / commodities in particular. My blogs will cover trends and developments in these sectors, and I will try to focus on those areas you may not have heard about or considered recently - Colin Carter